EV Payments in a Paybuyer System Are Legal

Paybuyer policy to ensure that advertisers have no legal liability

EV payments involve a prize (we call it a jackpot) and random chance, somewhat like a conventional sweepstakes or lottery. So, people naturally wonder if EV payments are legal.

As most people know, sweepstakes laws and anti-gambling laws stipulate that chance promotions involving products typically must have a No Purchase Entry option.

It's not quite that simple, though.

In Paybuyer's novel system, recipients of EV payments are required to buy something to be eligible to collect the prize. In fact, the system's rules and operations prohibit non-buyers from being eligible to win.

This novelty will be jarring to some people in the field who are used to the way conventional sweepstakes operate. Therefore, attorneys specializing in sweepstakes law have advised Paybuyer LLC's management that even though its system appears completely legal, it's possible that if Paybuyer prohibits non-buyers from participating, some law firms will sue.

At this time, Paybuyer LLC cannot indemnify advertisers who may be dragged into frivolous lawsuits. Consequently, to remove any doubt that EV payments via the Paybuyer system are legal, we have decided to provisionally allow No Purchase Entries.

Paybuyer LLC will pay for these free entries. This policy is temporary. We will alert all advertisers before we change it.

Below we explain why a No Purchase Entry option is not legally required in the Paybuyer system.

Laws regarding chance promotion vary by country.

Before delving into U.S. law, let us point out that EV payments offered through a Paybuyer type system are legal in the U.K., Australia, and New Zealand because in these regions a company offering a sweepstakes may require that participants purchase a product from that company.

EV payments in Paybuyer are also legal in China (we think, but are not 100% sure) because China allows a purchase condition, too, if the sweepstakes has a payoff of $600 or less.

EV payments in Paybuyer are legal in the U.S. and countries with similar chance promotion regimes because an EV payment in the Paybuyer system is not a gambling instrument. It is not a gambling instrument because the recipient does not pay for it. Legally speaking, it is a gift from an advertiser to the recipient.

Let us elaborate.

It's all about consideration.

Gambling according to U.S. law, illegal gambling involves three so-called elements: prize, chance, and consideration. If a contract, offer, or game is missing any of these elements, it is not gambling.

An EV payment in the Paybuyer system does have prize and chance, but not consideration.

Consideration means that a person pays or gives something to the provider of the chance to win in exchange for that chance to win.

For example, if you pay $1 for a lottery ticket, the ticket is a gambling instrument.

That's why in most countries, including the U.S., it is illegal for a company to give you a sweepstakes entry or lottery ticket on the condition that you buy that company's product or service.

For example, it is illegal for Proctor & Gamble to offer you a sweepstakes entry on the condition that you buy a tube of their toothpaste, Crest.

Therefore, any company in the U.S. that has offered a sweepstakes entry along with a purchase of the company's product has also offered a free entry option that does not require the purchase of the company's product.

The Paybuyer process is novel and different.

In the Paybuyer system, an EV payment does not involve consideration. Here's why:

If you call an advertiser and then buy the advertiser's product, the EV payment generated by that call is disqualified.
If you call an advertiser, the EV payment is valid only if you buy from a product from the advertiser's competitor.
- For example, Proctor & Gamble might give you an EV payment that is valid only if you buy their competitor's toothpaste, Colgate Total.

Thus, in the Paybuyer process you pay nothing to an advertiser that provides you an EV payment. You give no consideration for the EV payment.

It is true that to receive an EV payment you must spend a few minutes on a call with the advertiser. But, sweepstakes laws do not consider these few minutes to be a payment - to be consideration:

"Today, consideration [payment] for gambling almost always means betting money. This is particularly true when it comes to Internet gambling. Even if players have to spend time at a web page and effort in filling out a form or playing a game, and the web site operator gets more eyeballs looking at its banner ads, there is no consideration. If participants get prizes based on chance, but they do not risk any money, it is not gambling."

I. Nelson Rose in Gambling and the Law, 2001

In the Paybuyer process, the time you must spend to get an EV payment is less than the time it would take you to collect a free entry in most sweepstakes. For instance, it is certainly less than the time you have to spend on most phone surveys that reward you with a sweepstakes entry. Ergo, the time you spend on a call with an advertiser is not consideration for the EV payment.